Okomu Oil Q3 2017 Results – Neutral Rating Maintained

Must Read

2020 Brand Africa 100: These are the 10 most admired brands in Africa

NIKE RETAINS #1 IN AFRICA FOR THIRD YEAR IN A ROW AFRICAN BRANDS DROP BY OVER 60% IN...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is...

15 Wool Braid Hairstyles You Should Try

Wool braid hairstyles have been popular for years and show no signs of slowing down. Wool braids allow you...
Okomu Oil Q3 2017 Results - Neutral Rating MaintainedOkomu Oil Q3 2017 Results - Neutral Rating Maintained

Modest downward revisions to our estimates and price target

Okomu Oil’s (Okomu) Q3 2017 results surprised negatively – sales and PBT missed our estimates by 18% and 30% respectively. As such, we have reduced our earnings estimates over the 2017-18E period by 7% on average and our price target by 5% to N68.9.

Okomu shares have returned 62% this year (NSEASI: 38%) and are trading on a 2017E P/E of 8.7x for EPS growth of 14.3% y/y in 2018E. From current levels, the shares show an upside potential of 6% to our N68.9 price target As such, we are retaining our Neutral rating on the stock.

Gross margin weakness and tax offset double-digit sales growth

- Advertisement -

Okomu’s Q3 2017 results showed that sales and PBT grew by 22% y/y and 14% y/y to N4.1bn and N1.4bn respectively. However, PAT declined by – 73% y/y due to a 3,672bp y/y expansion in the tax rate.

Despite a net interest income of N65m (versus a charge of –N102m in Q3 2016), PBT growth was slower than the sales growth because of a -1,093bp y/y contraction in gross margin and an 11% y/y rise in operating expense. On a sequential basis, sales declined by -38% q/q. We attribute the sales decline to seasonality.

Read Also:  Okomu Oil sees 0.06% marginal growth in revenue in Q3 2018

Despite the positive net interest expense figure and a 20% q/q decline in operating expenses, these were not strong enough to offset the sales decline and a -2,863bp q/q contraction in gross margin, leading to PBT declining by -69% q/q. PAT declined by a wider margin of -95% q/q due to a higher tax rate of 88% compared with 28% recorded in the preceding quarter.

Outlook

- Advertisement -

Over the quarter, sales growth in the palm oil segment (17% y/y) was slower than growth in the rubber segment (42% y/y). The rubber segment now accounts for 23% of the company’s top line (vs 40% in 2011).

Okomu’s results were behind our estimates mainly due to negative surprises on the sales and gross margin lines. Despite the surprise, the changes to our estimates are modest because our view on the sector remains positive, mainly because of the supply gap and the favourable government policies that were put in place recently. We have forecasted gross margin of around 75% for the full year and we see sales and PBT growing by 47% y/y and 77% y/y respectively.

- Advertisement -
Okomu Oil Q3 2017 Results - Neutral Rating MaintainedOkomu Oil Q3 2017 Results - Neutral Rating Maintained

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Okomu Oil Q3 2017 Results - Neutral Rating MaintainedOkomu Oil Q3 2017 Results - Neutral Rating Maintained

Latest News

April 2020 Inflation Review – Inflation Accelerates Amid Pandemic Risk, Ramadan Arrival

In the latest report from the National Bureau of Statistics (NBS), the overall consumer price index - a measure...

2020 Brand Africa 100: Africa’s Best Brands Highlights

AFRICAN BRANDS DROP TO ALL TIME LOW 13% NON-AFRICAN BRANDS ACCOUNT FOR 87% OF THE TOP 100 BRANDS IN AFRICA NIKE RETAINS #1...

King of finance: GTBank is the Most Admired Financial Services Brand in Africa

Guaranty Trust Bank PLC (GTBank) has ascended to the number one position as the Most Admired Financial Services Brand in Africa. Brand Africa which...

Dangote Cement Reports Surge in Nigeria Sales as Earnings Jump to 249.2B Naira in Q1 2020

Dangote Cement PLC (DANGCEM-NL), Africa’s largest cement producer, announces unaudited results for the three months ended 31st March 2020. Financial Highlights Group revenue up 3.8%...

Nigeria’s GDP Grew By 1.87% in Q1 2020 amid global challenges

In the first quarter of 2020, Nigeria's Gross Domestic Product (GDP) grew by 1.87%(year-on-year) in real terms. This performance was recorded against the backdrop...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Okomu Oil Q3 2017 Results - Neutral Rating MaintainedOkomu Oil Q3 2017 Results - Neutral Rating Maintained